Wolfe Research analyst Peter Supino ended his bearish call on Paramount Global Inc. recently following the announcement that majority shareholder National Amusements obtained a $125 million preferred equity investment.
Supino upgraded Paramount’s stock PARA, +6.37% to peer perform from underperform late Friday, writing that he no longer sees the “negative asymmetry” required for a bearish stance in the wake of National Amusements’ new financial arrangement, which was announced late last week.
“The collateral for the loan amounts to a significant minority of [National Amusements’] 9.7% Paramount equity stake,” Supino wrote. “Given the Redstones’ financial situation appears even more pressing, we highly doubt that [National Amusements Chief Executive] Shari Redstone’s commitment to Paramount’s current money-losing strategies would be so great as to lead her towards surrendering those shares.”
As such, he anticipated that Redstone will be “increasingly negotiable about the prices at which she would sell assets, both large and small.” The deal signals to him that Redstone “must manage Paramount with a rising focus on capital preservation,” which likely limits the downside for equity investors, even if it doesn’t flash outright upside, in his view.
In fact, Supino had “deep concern about [the] business outlook” for Paramount, and didn’t see “a fundamental basis to own the stock.”
Paramount shares have suffered a tough recent stretch, falling 36% over the past month as the company’s financial struggles have become more prominent. Paramount slashed its dividend by nearly 80% earlier in May, with management saying the reduced dividend commitment would help the company drive shareholder value and push toward profitability in streaming.
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